Net earnings of eight state-owned banks and the Central Bank of Iran has been forecast at 3,247.7 trillion rials ($6.186 billion) in the March 2023-24 draft budget.
This is 40% higher on the 2,314.28 trillion rials ($4.4b) in the outgoing year, according to a report by the news agency of the Monetary and Banking Research Institute, IBENA.
Lenders have been placed in two categories based on their financial health. The revenue forecast is 1,855.07 trillion rials ($3.53b) for six banks that are either making profit or at the least break-even.
This group includes the Central Bank of Iran, Bank Melli, Bank Keshavarzi (AgriBank), Bank of Industry and Mine, Export Development Bank of Iran and Post Bank.
The CBI tops the list with a projected income of 256.58 trillion rials ($488.5 million), followed by Post Bank 3.5 trillion rials ($6.6m) and BIM and EDBI each with 1 trillion rials ($1.9m).
Bank Melli, the main state lender is expected to break-even by the end of the next fiscal year.
According to proposed budget, banks’ operating costs should be less than their income. However, total spending is seen at around 3,246.09 trillion rials ($6.183b) compared to 2,650 trillion rials ($5.04 billion) this year.
According to the budget bill, Bank Sepah, Tose'e Ta'avon Bank (Cooperatives Development Bank) and Bank Maskan – the main housing lender – are state-owned lenders projected to make losses next year. The three banks are expected to generate 1,390 trillion rials ($2.64b) collectively next year, while their collective expenses is project to stand at 1,490 trillion rials ($2.83b).
Sepah is predicted to be the biggest loser at 95 trillion rials ($180.9 million), mostly under the influence of and due to the megamerger of five banks with the bank in December 2020. Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar were the five loss-making lenders that merged with Sepah.
The Economy Ministry last month said an estimated 350 trillion rials ($666 million) is to be allocated for raising the capital of state banks. This should help improve their capital adequacy ratio except for Bank Melli and Sepah, to above 8% and augment their lending capacity.
Six state banks recently released their financial statements for the fiscal year that ended last March. A review shows that Melli lost 26.76 trillion rials ($50.91 million). This, however, was 60.3% less than the year before when it was 67.52 trillion rials ($128m) in the red.
The other five banks made 1,780 billion rials ($3.4 million) profit. The six banks' accumulated loss increased by 3.1% last year to 867.36 trillion rials ($1.65 billion), the largest portion of which, 695.35 trillion rials, belonged to Melli.
The capital adequacy ratio (CAR) of Bank Melli was 8.7 based on the last financial statement – the year before it was 11.29. The Export Development Bank of Iran had the highest CAR among the six lenders with 12.7, followed by Bank Maskan 8.7 and Bank of Industry and Mine 2.8.
Data also showed that Bank Maskan, Bank Keshavarzi and Cooperatives Development Bank raised capital during the year. The six banks collectively generated 543.84 trillion rials ($1.71 billion) from banking operations, posting 51% growth y/y.
